What a difference two years can make in the aero engine business. As the Franco-U.S. engine maker approached the 2011 Paris air show, the chill wind of uncertainty was blowing through CFM's traditional market base with Pratt & Whitney's geared turbofan taking the lead in engine selections for the newly launched .
Now, as the days count down to this year's show, the ambiguity has vanished. CFM and Pratt have established a more collegial status quo over the new engine option (NEO) market, and CFM's Leap engine is the sole source on the firmly launchedMAX and . “At [Le Bourget] we are expecting to show the industry, and of course the public, that we are back to a normal course of business,” says CFM President/CEO Jean-Paul Ebanga.
“Two years ago the Paris air show took place just after the launch of the Airbus A320NEO, and there was a frenetic [guessing game] regarding which engine supplier would be the winner and why CFM was still behind in terms of orders (compared with the PW1100G). All these were good questions at the time, and the show helped the whole industry see that CFM was still CFM, and that we were there for the long haul. Now, as this year's show approaches, we see that everything we predicted two years ago is happening. The market is strong, we have three new aircraft programs—the A320NEO/737 MAX and Comac C919—with significant sales, and we are still about three years away from entry-into-service. Within this context, CFM is doing well and the numbers speak for themselves. Two years ago we were telling the industry not to panic. We told them 'we know the market and we know what we are doing,' and two years later the market is where it should be.”
Leading up to the Le Bourget event this year, CFM has more than 29,400 total orders for theand last month marked the delivery of the 25,000th engine. With production of current-generation A320 and 737 models continuing to accelerate to record levels in the years running up to the transition to the NEO and MAX, CFM is also in the challenging position of readying the new Leap for production at the same high rate virtually from the get-go. Between the NEO, MAX and C919, the Leap family has attracted firm orders, spares and commitments for 4,581 units.
The company is now “shifting from definition of the product to focusing on execution,” says Ebanga who took the helm at CFM in 2011. “Last year we had a design freeze of the -1A/C [for NEO and C919], and we went through detailed design and production of the first parts for the first engine to test. We reached the design-freeze milestone for the -1B [MAX] engine on April 30, and in mid-May held our aircraft-level design freeze meeting with. Frankly from now to the end of the year it is all about execution in design, the start of production, making the first engine and the test campaign.”
Does CFM's president lose sleep over what could go wrong at the thought of this unprecedented transition while in the midst of record production rates? “Not really,” says Ebanga who believes implicitly in the rigor of his company's development and production plan. “When you look at the yearly production rate, we are clearly at the peak. We have never produced this level per year and, as we go into the 2017-20 period, we will transition between the two lines and go from the CFM56 to the Leap.
This is a significant challenge and it is the reason we are working flat out to be ready for it. But then who is better equipped to do this? I do not think anybody is. The experience of this organization is based on the people. You can't buy that experience, you have to build it. Look at the what happened when the U.S. car companies in Detroit sent teams to Japan to learn all the tricks of the Toyota production system. Although they learned all about the processes, it took 10 years to be able to produce at the same level of quality.”
Yet as CFM wrestles with the balancing act of transitioning from the CFM56 to the Leap at record rates, one persistent question remains: Does the phenomenal backlog for the A320NEO and 737 MAX represent a bubble that is about to burst? Not according to Ebanga, who says, “You can look at market stability in either the short term or the long term. If you take the long-term perspective—and had an assumption of world economic growth and development of the emerging economies—well, plugging in our forecast makes these assumptions really solid. So I'm not afraid about what we're saying in terms of orders—we are in a good band of strength.”
The airline industry itself has shown great resilience through the bad times, and will continue to be robust, Ebanga believes. “From time to time there is a crisis. Maybe tomorrow there will be something unforeseen, who knows? We see and face minor adjustments along the way all the time, but overall the forecast is very solid. For example, four to five years ago it was said that there would be no more financing available for the market, so there was a kind of negative consensus about whether airlines would be able to finance growth, but they found solutions. Crisis after crisis, this industry managed to find an appropriate answer.
At the Farnborough gathering in 2012, for instance, all the news was all about the depth of the euro currency crisis. But we said, 'We are not panicking and we think the outlook is good.' And look at this year. In 2013[International Air Transport Association] is forecasting a good year for the entire industry—the fourth good year in a row. The last time we experienced three consecutive good years was in the late 1990s.”
The market continues to be buoyant and, because of relentless demand, will likely remain so for the near term, adds Ebanga. “Over the next 20 years there will be a need for around 30,000 new aircraft of which two-thirds will be in the narrowbody market, therefore in CFM's playground. That's between 20,000 and 40,000 engines, so it is a pretty significant playground! So when you look at this size of this market—particularly being sole source on the MAX and C919—we have a large share. There are enough things to do, and it is a challenge because there is no substitute to this new generation of engine, so we have to deliver it because this is what the industry is looking for.”
Although the early campaigns over engine selections for NEO drew some inevitable “incentive” pricing, the dynamics of the market have since settled, says Ebanga. The outcome appears to be a more level playing field which CFM welcomes, he adds. “We would like the competition to succeed because our ultimate objective is to have a flourishing engine industry. We do not pretend to do it all. The better the industry performs, the better we will all be in the future. The other guys will build on their own experience. I cannot speak for Pratt & Whitney, but it would be appropriate for them to build on the IAE product.”
However, the battle is far from over, says Ebanga. “The market has been very competitive for the CFM56, and I think it will be the same for the Leap generation of engines. With every single launch of a new program, either narrowbody or widebody, you have had for several years a specific dynamic as the market sets up. After that it enters a second phase and although it is still tough, we can call that a normal competitive phase. It will not be any different for the new and/or current engine option or other programs. This will continue forever.”
For now, CFM is content to focus on its current commitments rather than seek new opportunities, says Ebanga. “Today we are 100% part of the plan for the MAX and Comac, as well as 50%-plus for NEO. We are well set and our plate is full. We would prefer to deliver on our commitments to them rather than chase the next opportunity and fall short on our deliveries to all our existing customers. It required courage and an appropriate level of willingness to stay restrained,” he says.
So will the next-generation CFM engine be conventional or an open rotor? “It could be an open rotor,” says Ebanga. “But more important than that is the philosophy we have used for a decade to always have a pipeline filled with technology, and to wait for the time when a new platform is launched to assemble that technology for the best solution—that is what we did for Leap. We strongly believe what we did for the Leap is the optimal approach. But in 2030, what will the airframe architecture be? Will the airframe companies push the envelope? The jury is still out, but we are working right now on a next-generation suite of technologies that would support an open rotor.”
While potential new engine architectures are somewhere in the distant future, Ebanga is focused on more fundamental changes closer to home.
Thanks to his tenure as president of the joint-Saturn PowerJet company, he learned a lot working to market the fledgling Sam146 engine for the 100. So Ebanga has had first-hand experience in running a company that has everything to prove. This background equipped him with a unique perspective for taking the reins at CFM, a company that once faced the same uphill struggle for credibility. As a result, Ebanga says, his plans for transforming CFM to meet the challenges of the future reflect the lessons of the past.
“The journey has already begun toward a different CFM. This was one of my areas of focus when I joined the company. My point was that when CFM had been set up in the 1970s and early 1980s, that team did a wonderful job of not only developing the product but also creating the right organization for putting in place all that leverage of the two parent companies. That feat is as remarkable to me as designing the engine itself.
“Then fast forward to now—Leap is launched and we have to ask ourselves to adjust to the coming market expectations over the next 10-20 years,” Ebanga says.
“We had already begun to integrate CFM services into our products. But what is beyond this? We are currently working to define what an engine maker should look like 20-30 years from now and how we can put CFM on the right path to be this 'dream' company. So this means we are working to define what needs to be adjusted, and changed and invented in howand Snecma work together. Our challenge is to be even more of an efficient and innovative company.”